2 Supply and Demand a. Given Q-700- 2P andQ-2P 100, what is the market equilibri

ID: 1138548 • Letter: 2

Question

2 Supply and Demand a. Given Q-700- 2P andQ-2P 100, what is the market equilibrium price (P) and quantity (Q)? (5 points) b Suppose the market changes to: Q-700-2P and Q-2P- 40. Caleulate the new market equilibrium price (P and quantity (Q"). (5 points) Elasticity a. Use your answers in the supply and demand question above, to calculate the mid- point formula for the price elasticity of demand (two decimal placcs) (4 points) unit elastic? (3 points) inelastic or unit elastie. (3 points b Using your answer in part a, is the price elasticity of demand elastic, inelastie or State how you were able to determine if the price elasticity of demand is elastic

Explanation / Answer

a. Qd =Qs
700-2P=2P-100
800 = 4P
P=200
Qd=700-2P=700-2*200=700-400=300

b.
Qd =Qs
700-2P=2P-40
740 = 4P
P=185
Qd=700-2P=700-2*185=700-370=330

% Change in P

% Change in Q

700

-100

600

2.00

-0.15

-0.08

100

500

100

0.67

-0.18

-0.27

150

400

200

0.40

-0.22

-0.56

200

300

0.29

-0.29

-1.00

250

200

400

0.22

-0.40

-1.80

300

100

500

0.18

-0.67

-3.67

350

600

0.15

-2.00

-13.00

The formula, Ed = (Q2-Q1)/((Q2+Q1)/2)/(P2-P1)/((P2+P1)/2)
b. Unit elastic, as the elasticity value is -1
c. The price elasticity is determined by the elasticity values. Value of less than 1, inelastic, Value equal to 1 is Unit elastic and value greater than 1, it is elastic